CSG (CSV)

Royal Bank of Scotland has substantially raised its target price on CSG on expectations that the IT services company will win more work from the Northern Territory government.

The broker already has a “buy" recommendation on the stock, but increased its target price to $2.06 from $1.43.

CSG recently re-bid for a “substantial parcel of work" with the NT government, and RBS thinks it is probable CSG will win additional work.

Bids for the information, communication and technology contracts have been submitted and CSG is awaiting an outcome. RBS thinks that at worst the company will maintain its current level of work.

RBS notes factors in CSG’s favour include that it has worked on key components of these contracts over the past five years, has strong local ties and a good track record of delivering high-quality services.

If CSG does not win the contracts, the stock will trade on an “undemanding" price-earnings multiple of 14 times 2011 earnings. If it wins the contracts, it will trade on a multiple of 10.6 times, and could approach 8 times if it wins more work than it has now.